Storage costs are another important element of your holding costs. When you think of storage costs you should think of any of the resources that you use to handle and store your inventory. These costs may be direct or indirect money spent on the storage of your goods. Storage costs can include costs for warehousing, warehouse equipment, space, rent, electricity, software, depreciation and warehouse personnel.
In most cases storage costs are described as a percentage of your inventory value. A very important thing to keep in mind is that when you increase the volume of your inventory your storage costs will go up too. Likewise, if you have expensive equipment, lots of unused space or personnel this can cause the storage costs to rise too. On the other hand, lowering inventory frees up space which reduces storage costs and may require the usage of less equipment which also reduces your storage costs.
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